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The value of customized insurance for farmers in rural Bangladesh:

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  • Clarke, Danielle
  • Das, Narayan C.
  • de Nicola, Francesca
  • Hill, Ruth Vargas
  • Kumar, Neha
  • Mehta, Parendi

Abstract

Farmers in rural Bangladesh face multiple sources of uninsured risk to agricultural production and household assets. In this paper, we present results from an experimental demand-elicitation exercise in rural Bangladesh to shed light on smallholder farmers’ interest in formal insurance products. We propose a suite of insurance and savings products, and we randomly vary the price of one insurance option (area-yield insurance) and the presence of one of the savings options (group savings). Consistent with economic theory, farmers buy more of the insurance products that cover the risks they primarily face. However, because farmers are subject to a variety of risks, they do not focus on only one type of insurance; instead, they evenly split their endowment between life and disability insurance and agricultural insurance. Demand for area-yield insurance falls with price; we also observe important cross-price elasticities with other insurance products. The presence of group savings does not alter demand for insurance, though group savings is found to be a particularly popular risk management tool, especially when decisions are made in groups.

Suggested Citation

  • Clarke, Danielle & Das, Narayan C. & de Nicola, Francesca & Hill, Ruth Vargas & Kumar, Neha & Mehta, Parendi, 2012. "The value of customized insurance for farmers in rural Bangladesh:," IFPRI discussion papers 1202, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1202
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    References listed on IDEAS

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    Cited by:

    1. Awel Y. & Azomahou T.T., 2015. "Risk preference or financial literacy? Behavioural experiment on index insurance demand," MERIT Working Papers 2015-005, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Patrick S. Ward & David L. Ortega & David J. Spielman & Neha Kumar & Sumedha Minocha, 2020. "Demand for Complementary Financial and Technological Tools for Managing Drought Risk," Economic Development and Cultural Change, University of Chicago Press, vol. 68(2), pages 607-653.
    3. Clarke, Daniel J. & Kumar, Neha, 2015. "Microinsurance decisions: Gendered evidence from rural Bangladesh:," IFPRI discussion papers 1465, International Food Policy Research Institute (IFPRI).
    4. Ahmed, T., 2013. "Scoping report: Current status of index-based insurance in Bangladesh," Working Papers, The WorldFish Center, number 40289, June.
    5. Ortega, David L. & Ward, Patrick S. & Caputo, Vincenzina, 2019. "Evaluating producer preferences and information processing strategies for drought risk management tools in Bangladesh," World Development Perspectives, Elsevier, vol. 15(C), pages 1-1.
    6. Platteau, Jean-Philippe & De Bock, Ombeline & Gelade, Wouter, 2017. "The Demand for Microinsurance: A Literature Review," World Development, Elsevier, vol. 94(C), pages 139-156.

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    Keywords

    Risk; Insurance; demand; Elasticity; Decision-making; rural areas;
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